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Tesla Stock: Sell The Rip
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Flamingo","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","crmLevel":2,"crmLevelSwitch":0,"followedFlag":false,"idStr":"4150255566407132","authorIdStr":"4150255566407132"},"themes":[],"htmlText":"Share your opinion about this news…","listText":"Share your opinion about this news…","text":"Share your opinion about this news…","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/326041951801664","repostId":"2450024292","repostType":2,"repost":{"id":"2450024292","pubTimestamp":1720623704,"share":"https://ttm.financial/m/news/2450024292?lang=&edition=fundamental","pubTime":"2024-07-10 23:01","market":"fut","language":"en","title":"Tesla Stock: Sell The Rip","url":"https://stock-news.laohu8.com/highlight/detail?id=2450024292","media":"seekingalpha","summary":"I don't think the current recovery rally in Tesla, Inc. stock will last long as it is not backed by the company's most important fundamentals as far as I can see.Q2 consolidated delivery figures becam","content":"<html><head></head><body><ul style=\"\"><li><p>I don't think the current recovery rally in Tesla, Inc. stock will last long as it is not backed by the company's most important fundamentals as far as I can see.</p></li><li><p>Q2 consolidated delivery figures became the ultimate catalyst for Tesla to start the recovery rally, as it reported 443,956 deliveries for Q2, surpassing the consensus of 437,812.</p></li><li><p>In the short term, I expect Tesla stock to start testing its way out of the recent price consolidation. The seasonal data points to a weak momentum shortly.</p></li><li><p>Given the serious overvaluation (40.5x P/E forecast for 2028), I see some pretty serious downside ahead.</p></li><li><p>I've therefore decided to leave my “Sell” rating unchanged today. Sell the rip.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/d1c20a387bc8b53438311bb3b97e7cc3\" tg-width=\"750\" tg-height=\"500\"/></p><p>Magnus Kvandal</p><p></p><h2 id=\"id_3935789703\">Intro & Thesis</h2><p>If you've been following me for a while, you've probably read some of my previous 15 articles on <strong>Tesla, Inc.</strong> (NASDAQ:TSLA) stock. I downgraded the stock back in April 2024 when a share was trading for $185. I made the case for not buying the dip, and since then, TSLA's performance can be compared to that of the S&P 500 Index (SP500, SPY) thanks to the rally we've seen over the past three weeks alone.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4810c62fa48e365d7719d16f562891bd\" tg-width=\"640\" tg-height=\"248\"/></p><p>Seeking Alpha Premium, TSLA</p><p></p><p>Despite this phenomenal strength and the growing positive sentiment around TSLA, I don't think the current recovery rally will last long as it is not backed by the company's most important fundamentals as far as I can see.</p><h2 id=\"id_1680935579\">Why Do I Think So?</h2><p>As is typically the case with a thesis update, it's essential to be guided by the latest financial data. Therefore, I suggest taking a closer look at Tesla's Q1 2024 results, even though they are likely already fully reflected in the current stock price given the time since their publication.</p><p>In Q1, Tesla's overall revenue declined by 9% to $21.301 billion. TSLA's Automotive division revenue was the key "negative driver" as it fell by 13% to $17.378 billion, while Services and Other revenue rose 25% YoY to $2.288 billion. The consolidated gross profit margin continued its downward trajectory, slipping from 19.34% last year to 17.35%, according to Seeking Alpha data. As we can see, the Auto margins saw a slight dip from 18.9% to 18.5%. However, as the CFO noted during the latest earnings call, when excluding the impact of the Cybertruck and the ramp-up costs for the Model 3 in Fremont, the margins actually improved slightly. This was thanks to cost reductions and revenue from the new Autopark feature for certain U.S. vehicles.</p><p>In Q1 2024, Tesla delivered 386,810 vehicles, including 17,027 Model S and Model X and 369,783 Model 3 and Model Y, marking a 9% decrease from Q1 2023. We know that the Shanghai factory has been running at full capacity since Q4 last year despite previous production lulls, but this fact didn't help Tesla to maintain its market share in China, which continued to shrink in June:</p><blockquote><p><em>Tesla's share of China's new energy vehicle (NEV) market, which includes both battery electric vehicles and plug-in hybrids, </em><strong><em>fell to 6.92% in June, down from 11.16% last year.</em></strong><em> However, on a sequential basis, Tesla's sales in China are up 7.33% from May, when the Elon Musk-led company sold 55,215 vehicles.</em></p><p>Source: Benzinga [July 8, 2024], emphasis added.</p></blockquote><p>On the bright side, the launch of Cybertruck sales has enabled the company to increase its global market share to 20%, according to CounterPoint Research. That's 2% less than in Q1 FY2023, but on a QoQ basis the growth looks significant indeed.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/da7c6212bb7fa2d16415c72b3065aa0d\" tg-width=\"640\" tg-height=\"187\"/></p><p>CounterPoint Research data</p><p></p><p>Tesla's revenue from Energy Generation and Storage grew in Q1 by 7% YoY to $1.635 billion due to high demand for Powerwall and Megapack products. However, such a low growth rate doesn't indicate to me any outstanding demand in the market, to be honest. Anyway, this demand is now "leading Tesla to scale up production in a dedicated Megapack facility." Although perhaps my skepticism is unfounded because Tesla achieved a record high for stationary storage deployments at 9.4 GWh in Q2, nearly double Morgan Stanley's forecast (proprietary source, July 2024 data).</p><p>As we know, the company faced enormous operational challenges, including shipping disruptions in the Red Sea and an arson attack at Gigafactory Berlin; both challenges have been resolved, according to the management commentary. Q2 delivery numbers indicate that it's indeed the case, as the company delivered 33,000 more units than it produced in Q2, resulting in a 7-day reduction in days' supply of inventory. This reduction provided a $1.5 billion boost to working capital (way higher than many analysts expected in the recent past). Overall, the Q2 consolidated delivery figures became the ultimate catalyst for TSLA to start the recovery rally, as it reported 443,956 deliveries for Q2, surpassing the consensus of 437,812.</p><p>My current view on Tesla is quite mixed. On one hand, the company is clearly feeling strong pressure from its Chinese peers and the pricing war keeps damaging the margins. On the other hand, Tesla remains the largest EV maker in terms of global reach and brand strength. I agree with Argus Research analysts who noted recently (proprietary source, May 2024) that Tesla is navigating between 2 major growth phases now: the global expansion of the Model 3/Y platform and advancements in autonomy and new product introductions.</p><p>However, I have some reservations about Argus' other assessment. While the EV industry growth has slowed, they believe Tesla will overcome short-term demand and production challenges, ultimately emerging as a stronger and more efficient EV producer in both the short and long term. I think that despite Tesla's strong long-term prospects (I sincerely believe in Tesla for the next 5–10 years), the short-to-medium term future does not look as promising. In any case, I can't say that we have enough reason to believe otherwise.</p><p>Morgan Stanley remains cautious about Tesla's ability to match last year's delivery numbers, noting that Tesla would need to grow 2H 2024 deliveries by around 6% YoY to maintain volume. I don't think this will be as easy to do as it might seem at first glance.</p><p>One major area of concern I see is vehicle pricing and the automotive non-GAAP gross margin. This could be taken as optimistic for future prices that inventory levels fell, but 0%/low financing incentives and lower production in Q2 are likely to be margin headwinds according to Goldman Sachs analysts (proprietary source, July 2024). Moreover, margins may come under more strain due to potential tariffs later this year.</p><p>Another significant risk is the timing for new lower-cost models or variants. As we know, Tesla plans to begin shipping these new models as early as late 2024 or 2025. So, given the tight timeframe and the use of existing manufacturing lines, these new models may initially incorporate design elements from the Model 3 and Model Y.</p><p>The degree to which these new features and costs will be differentiated and how it all may lead to a growth slow is a big question right now. I think the company can, without even noticing it, cannibalize part of its existing traffic in this way.</p><p>It also confuses me that Wall Street is forecasting 20% earnings per share growth (CAGR) over the next 5 years and TSLA is expected to trade at 40.5x earnings at the end of 2028.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/64fc93da59973793c1e42869f146b198\" tg-width=\"640\" tg-height=\"173\"/></p><p>Seeking Alpha, TSLA, the author's notes</p><p></p><p>I don’t see much point in building a DCF model to question such a high premium. Of course, we can assume that robotaxis will take over the world, AI-powered solutions in autonomous transportation will change the game and all that, but none of that can happen overnight in my opinion. The company's stock needs to have a margin of safety that allows it to grow comfortably even at a somewhat high valuation. Take Nvidia (NVDA) as an example - even after a phenomenal rally, it eventually traded below 20x the forwarding P/E ratio, leaving many skeptics (myself included) hanging. But with Tesla, we see that it has no such margin of safety - the rally of the last few weeks is based only on hope and is not confirmed by the fundamentals.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/83926df5c79bcdf1f59e5e58c088ce0d\" tg-width=\"640\" tg-height=\"302\"/></p><p>TrendSpider Software, TSLA weekly, notes added</p><p></p><p>In the short term, I expect Tesla stock to start testing its way out of the recent price consolidation. The seasonal data on stock trading since 2010 points to a weakening of buyers in late summer - early fall.</p><p>Therefore, I recommend selling the current rip in TSLA stock.</p><h2 id=\"id_891535734\">Where Can I Be Wrong?</h2><p>Actually, I'm taking a significant risk in rating Tesla a "sell" today given its recent momentum, as much of the company's downturn may already be priced in due to its cyclical nature, meaning current margin issues may not persist. Wall Street is already anticipating a decline in EPS over the next 1 quarter only. Thus, an unexpected downturn may not materialize, and the next earnings announcement (on July 23rd) could change the outlook if Elon Musk and his team present some major positive developments. Furthermore, Tesla's long-term efforts to diversify its business and expand its ecosystem may ultimately prove my medium-term, currently pessimistic view on growth potential to be unfounded.</p><p>Perhaps I'm also wrong in calling Tesla as an overpriced stock because the company has many supporters who are willing to pay a very high premium for its growth prospects. This may continue.</p><h2 id=\"id_2310553008\">The Verdict</h2><p>Although, I think Tesla is a solid pick in the long term - more on this in my old articles - I'm still skeptical about the current hope in the air for a quick business recovery. I really like the company's approach to diversify and build a full-fledged energy-efficient ecosystem around its brand, but I don't like the trend in gross/EBIT margins and the very high competition that is getting stronger. Although the company managed to resist its rivals effectively in Q1 and apparently also in Q2, 2024, the trend towards cheaper electric cars continues. Nobody knows how low Tesla's gross margin can go until this is no longer a pressing issue for the company. Given the serious overvaluation (40.5x P/E forecast for 2028), I see some pretty serious downside ahead. Goldman Sachs sees a downside potential of ~16.6%, but given the recent price increases, I think this could be even higher.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4fa6bd55c28a7cf3c998b67e0820458e\" tg-width=\"640\" tg-height=\"384\"/></p><p>GS [proprietary source, July 2024]</p><p></p><p>I have therefore decided to leave my "Sell" rating unchanged today.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Tesla Stock: Sell The Rip</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTesla Stock: Sell The Rip\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-10 23:01 GMT+8 <a href=https://seekingalpha.com/article/4703146-tesla-stock-sell-the-rip><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>I don't think the current recovery rally in Tesla, Inc. stock will last long as it is not backed by the company's most important fundamentals as far as I can see.Q2 consolidated delivery figures ...</p>\n\n<a href=\"https://seekingalpha.com/article/4703146-tesla-stock-sell-the-rip\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY \"A\" (USD) ACC","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","BK4527":"明星科技股","LU1551013342.USD":"Allianz Income and Growth Cl AMg2 DIS USD","LU0056508442.USD":"贝莱德世界科技基金A2","BK4503":"景林资产持仓","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","LU0234572021.USD":"高盛美国核心股票组合Acc","LU2249611893.SGD":"BNP PARIBAS ENERGY TRANSITION \"CRH\" (SGD) ACC","LU0820561909.HKD":"ALLIANZ INCOME AND GROWTH \"AM\" (HKD) INC","IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","LU0109392836.USD":"富兰克林科技股A","LU0820562030.AUD":"ALLIANZ INCOME AND GROWTH \"AMH2\" (AUDHDG) H2 INC","IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","LU1914381329.SGD":"Allianz Best Styles Global Equity Cl ET Acc H2-SGD","LU0320765646.SGD":"FTIF - Franklin Income A MDIS SGD-H1","SG9999015945.SGD":"LionGlobal Disruptive Innovation Fund A SGD","LU1363072403.SGD":"Fidelity Global Financial Services A-ACC-SGD","BK4504":"桥水持仓","TSLL":"Direxion Daily TSLA Bull 2X Shares","LU0106831901.USD":"贝莱德世界金融基金A2","BK4511":"特斯拉概念","TSLA":"特斯拉","LU0097036916.USD":"贝莱德美国增长A2 USD","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU1548497426.USD":"安联环球人工智能AT Acc","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","IE0034235295.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"A\" (USD) ACC","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU1861558580.USD":"日兴方舟颠覆性创新基金B","LU1861220033.SGD":"Blackrock Next Generation Technology A2 SGD-H","BK4532":"文艺复兴科技持仓","LU0820561818.USD":"安联收益及增长平衡基金Cl AM DIS","BK4592":"伊斯兰概念","LU1839511570.USD":"WELLS FARGO GLOBAL FACTOR ENHANCED EQUITY \"I\" (USD) ACC","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0289739343.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (SGD) ACC","LU2756315318.SGD":"ALLIANZ INCOME AND GROWTH \"AMG\" (SGDHDG) INC A","BK4534":"瑞士信贷持仓","BK4159":"经销商","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU0238689110.USD":"贝莱德环球动力股票基金"},"source_url":"https://seekingalpha.com/article/4703146-tesla-stock-sell-the-rip","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2450024292","content_text":"I don't think the current recovery rally in Tesla, Inc. stock will last long as it is not backed by the company's most important fundamentals as far as I can see.Q2 consolidated delivery figures became the ultimate catalyst for Tesla to start the recovery rally, as it reported 443,956 deliveries for Q2, surpassing the consensus of 437,812.In the short term, I expect Tesla stock to start testing its way out of the recent price consolidation. The seasonal data points to a weak momentum shortly.Given the serious overvaluation (40.5x P/E forecast for 2028), I see some pretty serious downside ahead.I've therefore decided to leave my “Sell” rating unchanged today. Sell the rip.Magnus KvandalIntro & ThesisIf you've been following me for a while, you've probably read some of my previous 15 articles on Tesla, Inc. (NASDAQ:TSLA) stock. I downgraded the stock back in April 2024 when a share was trading for $185. I made the case for not buying the dip, and since then, TSLA's performance can be compared to that of the S&P 500 Index (SP500, SPY) thanks to the rally we've seen over the past three weeks alone.Seeking Alpha Premium, TSLADespite this phenomenal strength and the growing positive sentiment around TSLA, I don't think the current recovery rally will last long as it is not backed by the company's most important fundamentals as far as I can see.Why Do I Think So?As is typically the case with a thesis update, it's essential to be guided by the latest financial data. Therefore, I suggest taking a closer look at Tesla's Q1 2024 results, even though they are likely already fully reflected in the current stock price given the time since their publication.In Q1, Tesla's overall revenue declined by 9% to $21.301 billion. TSLA's Automotive division revenue was the key \"negative driver\" as it fell by 13% to $17.378 billion, while Services and Other revenue rose 25% YoY to $2.288 billion. The consolidated gross profit margin continued its downward trajectory, slipping from 19.34% last year to 17.35%, according to Seeking Alpha data. As we can see, the Auto margins saw a slight dip from 18.9% to 18.5%. However, as the CFO noted during the latest earnings call, when excluding the impact of the Cybertruck and the ramp-up costs for the Model 3 in Fremont, the margins actually improved slightly. This was thanks to cost reductions and revenue from the new Autopark feature for certain U.S. vehicles.In Q1 2024, Tesla delivered 386,810 vehicles, including 17,027 Model S and Model X and 369,783 Model 3 and Model Y, marking a 9% decrease from Q1 2023. We know that the Shanghai factory has been running at full capacity since Q4 last year despite previous production lulls, but this fact didn't help Tesla to maintain its market share in China, which continued to shrink in June:Tesla's share of China's new energy vehicle (NEV) market, which includes both battery electric vehicles and plug-in hybrids, fell to 6.92% in June, down from 11.16% last year. However, on a sequential basis, Tesla's sales in China are up 7.33% from May, when the Elon Musk-led company sold 55,215 vehicles.Source: Benzinga [July 8, 2024], emphasis added.On the bright side, the launch of Cybertruck sales has enabled the company to increase its global market share to 20%, according to CounterPoint Research. That's 2% less than in Q1 FY2023, but on a QoQ basis the growth looks significant indeed.CounterPoint Research dataTesla's revenue from Energy Generation and Storage grew in Q1 by 7% YoY to $1.635 billion due to high demand for Powerwall and Megapack products. However, such a low growth rate doesn't indicate to me any outstanding demand in the market, to be honest. Anyway, this demand is now \"leading Tesla to scale up production in a dedicated Megapack facility.\" Although perhaps my skepticism is unfounded because Tesla achieved a record high for stationary storage deployments at 9.4 GWh in Q2, nearly double Morgan Stanley's forecast (proprietary source, July 2024 data).As we know, the company faced enormous operational challenges, including shipping disruptions in the Red Sea and an arson attack at Gigafactory Berlin; both challenges have been resolved, according to the management commentary. Q2 delivery numbers indicate that it's indeed the case, as the company delivered 33,000 more units than it produced in Q2, resulting in a 7-day reduction in days' supply of inventory. This reduction provided a $1.5 billion boost to working capital (way higher than many analysts expected in the recent past). Overall, the Q2 consolidated delivery figures became the ultimate catalyst for TSLA to start the recovery rally, as it reported 443,956 deliveries for Q2, surpassing the consensus of 437,812.My current view on Tesla is quite mixed. On one hand, the company is clearly feeling strong pressure from its Chinese peers and the pricing war keeps damaging the margins. On the other hand, Tesla remains the largest EV maker in terms of global reach and brand strength. I agree with Argus Research analysts who noted recently (proprietary source, May 2024) that Tesla is navigating between 2 major growth phases now: the global expansion of the Model 3/Y platform and advancements in autonomy and new product introductions.However, I have some reservations about Argus' other assessment. While the EV industry growth has slowed, they believe Tesla will overcome short-term demand and production challenges, ultimately emerging as a stronger and more efficient EV producer in both the short and long term. I think that despite Tesla's strong long-term prospects (I sincerely believe in Tesla for the next 5–10 years), the short-to-medium term future does not look as promising. In any case, I can't say that we have enough reason to believe otherwise.Morgan Stanley remains cautious about Tesla's ability to match last year's delivery numbers, noting that Tesla would need to grow 2H 2024 deliveries by around 6% YoY to maintain volume. I don't think this will be as easy to do as it might seem at first glance.One major area of concern I see is vehicle pricing and the automotive non-GAAP gross margin. This could be taken as optimistic for future prices that inventory levels fell, but 0%/low financing incentives and lower production in Q2 are likely to be margin headwinds according to Goldman Sachs analysts (proprietary source, July 2024). Moreover, margins may come under more strain due to potential tariffs later this year.Another significant risk is the timing for new lower-cost models or variants. As we know, Tesla plans to begin shipping these new models as early as late 2024 or 2025. So, given the tight timeframe and the use of existing manufacturing lines, these new models may initially incorporate design elements from the Model 3 and Model Y.The degree to which these new features and costs will be differentiated and how it all may lead to a growth slow is a big question right now. I think the company can, without even noticing it, cannibalize part of its existing traffic in this way.It also confuses me that Wall Street is forecasting 20% earnings per share growth (CAGR) over the next 5 years and TSLA is expected to trade at 40.5x earnings at the end of 2028.Seeking Alpha, TSLA, the author's notesI don’t see much point in building a DCF model to question such a high premium. Of course, we can assume that robotaxis will take over the world, AI-powered solutions in autonomous transportation will change the game and all that, but none of that can happen overnight in my opinion. The company's stock needs to have a margin of safety that allows it to grow comfortably even at a somewhat high valuation. Take Nvidia (NVDA) as an example - even after a phenomenal rally, it eventually traded below 20x the forwarding P/E ratio, leaving many skeptics (myself included) hanging. But with Tesla, we see that it has no such margin of safety - the rally of the last few weeks is based only on hope and is not confirmed by the fundamentals.TrendSpider Software, TSLA weekly, notes addedIn the short term, I expect Tesla stock to start testing its way out of the recent price consolidation. The seasonal data on stock trading since 2010 points to a weakening of buyers in late summer - early fall.Therefore, I recommend selling the current rip in TSLA stock.Where Can I Be Wrong?Actually, I'm taking a significant risk in rating Tesla a \"sell\" today given its recent momentum, as much of the company's downturn may already be priced in due to its cyclical nature, meaning current margin issues may not persist. Wall Street is already anticipating a decline in EPS over the next 1 quarter only. Thus, an unexpected downturn may not materialize, and the next earnings announcement (on July 23rd) could change the outlook if Elon Musk and his team present some major positive developments. Furthermore, Tesla's long-term efforts to diversify its business and expand its ecosystem may ultimately prove my medium-term, currently pessimistic view on growth potential to be unfounded.Perhaps I'm also wrong in calling Tesla as an overpriced stock because the company has many supporters who are willing to pay a very high premium for its growth prospects. This may continue.The VerdictAlthough, I think Tesla is a solid pick in the long term - more on this in my old articles - I'm still skeptical about the current hope in the air for a quick business recovery. I really like the company's approach to diversify and build a full-fledged energy-efficient ecosystem around its brand, but I don't like the trend in gross/EBIT margins and the very high competition that is getting stronger. Although the company managed to resist its rivals effectively in Q1 and apparently also in Q2, 2024, the trend towards cheaper electric cars continues. Nobody knows how low Tesla's gross margin can go until this is no longer a pressing issue for the company. Given the serious overvaluation (40.5x P/E forecast for 2028), I see some pretty serious downside ahead. Goldman Sachs sees a downside potential of ~16.6%, but given the recent price increases, I think this could be even higher.GS [proprietary source, July 2024]I have therefore decided to leave my \"Sell\" rating unchanged today.","news_type":1},"isVote":1,"tweetType":1,"viewCount":59,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"hots":[{"id":326041951801664,"gmtCreate":1720624171774,"gmtModify":1720624471231,"author":{"id":"4150255566407132","authorId":"4150255566407132","name":"Curious Flamingo","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","crmLevel":2,"crmLevelSwitch":0,"followedFlag":false,"idStr":"4150255566407132","authorIdStr":"4150255566407132"},"themes":[],"htmlText":"Share your opinion about this news…","listText":"Share your opinion about this news…","text":"Share your opinion about this news…","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/326041951801664","repostId":"2450024292","repostType":2,"repost":{"id":"2450024292","pubTimestamp":1720623704,"share":"https://ttm.financial/m/news/2450024292?lang=&edition=fundamental","pubTime":"2024-07-10 23:01","market":"fut","language":"en","title":"Tesla Stock: Sell The Rip","url":"https://stock-news.laohu8.com/highlight/detail?id=2450024292","media":"seekingalpha","summary":"I don't think the current recovery rally in Tesla, Inc. stock will last long as it is not backed by the company's most important fundamentals as far as I can see.Q2 consolidated delivery figures becam","content":"<html><head></head><body><ul style=\"\"><li><p>I don't think the current recovery rally in Tesla, Inc. stock will last long as it is not backed by the company's most important fundamentals as far as I can see.</p></li><li><p>Q2 consolidated delivery figures became the ultimate catalyst for Tesla to start the recovery rally, as it reported 443,956 deliveries for Q2, surpassing the consensus of 437,812.</p></li><li><p>In the short term, I expect Tesla stock to start testing its way out of the recent price consolidation. The seasonal data points to a weak momentum shortly.</p></li><li><p>Given the serious overvaluation (40.5x P/E forecast for 2028), I see some pretty serious downside ahead.</p></li><li><p>I've therefore decided to leave my “Sell” rating unchanged today. Sell the rip.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/d1c20a387bc8b53438311bb3b97e7cc3\" tg-width=\"750\" tg-height=\"500\"/></p><p>Magnus Kvandal</p><p></p><h2 id=\"id_3935789703\">Intro & Thesis</h2><p>If you've been following me for a while, you've probably read some of my previous 15 articles on <strong>Tesla, Inc.</strong> (NASDAQ:TSLA) stock. I downgraded the stock back in April 2024 when a share was trading for $185. I made the case for not buying the dip, and since then, TSLA's performance can be compared to that of the S&P 500 Index (SP500, SPY) thanks to the rally we've seen over the past three weeks alone.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4810c62fa48e365d7719d16f562891bd\" tg-width=\"640\" tg-height=\"248\"/></p><p>Seeking Alpha Premium, TSLA</p><p></p><p>Despite this phenomenal strength and the growing positive sentiment around TSLA, I don't think the current recovery rally will last long as it is not backed by the company's most important fundamentals as far as I can see.</p><h2 id=\"id_1680935579\">Why Do I Think So?</h2><p>As is typically the case with a thesis update, it's essential to be guided by the latest financial data. Therefore, I suggest taking a closer look at Tesla's Q1 2024 results, even though they are likely already fully reflected in the current stock price given the time since their publication.</p><p>In Q1, Tesla's overall revenue declined by 9% to $21.301 billion. TSLA's Automotive division revenue was the key "negative driver" as it fell by 13% to $17.378 billion, while Services and Other revenue rose 25% YoY to $2.288 billion. The consolidated gross profit margin continued its downward trajectory, slipping from 19.34% last year to 17.35%, according to Seeking Alpha data. As we can see, the Auto margins saw a slight dip from 18.9% to 18.5%. However, as the CFO noted during the latest earnings call, when excluding the impact of the Cybertruck and the ramp-up costs for the Model 3 in Fremont, the margins actually improved slightly. This was thanks to cost reductions and revenue from the new Autopark feature for certain U.S. vehicles.</p><p>In Q1 2024, Tesla delivered 386,810 vehicles, including 17,027 Model S and Model X and 369,783 Model 3 and Model Y, marking a 9% decrease from Q1 2023. We know that the Shanghai factory has been running at full capacity since Q4 last year despite previous production lulls, but this fact didn't help Tesla to maintain its market share in China, which continued to shrink in June:</p><blockquote><p><em>Tesla's share of China's new energy vehicle (NEV) market, which includes both battery electric vehicles and plug-in hybrids, </em><strong><em>fell to 6.92% in June, down from 11.16% last year.</em></strong><em> However, on a sequential basis, Tesla's sales in China are up 7.33% from May, when the Elon Musk-led company sold 55,215 vehicles.</em></p><p>Source: Benzinga [July 8, 2024], emphasis added.</p></blockquote><p>On the bright side, the launch of Cybertruck sales has enabled the company to increase its global market share to 20%, according to CounterPoint Research. That's 2% less than in Q1 FY2023, but on a QoQ basis the growth looks significant indeed.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/da7c6212bb7fa2d16415c72b3065aa0d\" tg-width=\"640\" tg-height=\"187\"/></p><p>CounterPoint Research data</p><p></p><p>Tesla's revenue from Energy Generation and Storage grew in Q1 by 7% YoY to $1.635 billion due to high demand for Powerwall and Megapack products. However, such a low growth rate doesn't indicate to me any outstanding demand in the market, to be honest. Anyway, this demand is now "leading Tesla to scale up production in a dedicated Megapack facility." Although perhaps my skepticism is unfounded because Tesla achieved a record high for stationary storage deployments at 9.4 GWh in Q2, nearly double Morgan Stanley's forecast (proprietary source, July 2024 data).</p><p>As we know, the company faced enormous operational challenges, including shipping disruptions in the Red Sea and an arson attack at Gigafactory Berlin; both challenges have been resolved, according to the management commentary. Q2 delivery numbers indicate that it's indeed the case, as the company delivered 33,000 more units than it produced in Q2, resulting in a 7-day reduction in days' supply of inventory. This reduction provided a $1.5 billion boost to working capital (way higher than many analysts expected in the recent past). Overall, the Q2 consolidated delivery figures became the ultimate catalyst for TSLA to start the recovery rally, as it reported 443,956 deliveries for Q2, surpassing the consensus of 437,812.</p><p>My current view on Tesla is quite mixed. On one hand, the company is clearly feeling strong pressure from its Chinese peers and the pricing war keeps damaging the margins. On the other hand, Tesla remains the largest EV maker in terms of global reach and brand strength. I agree with Argus Research analysts who noted recently (proprietary source, May 2024) that Tesla is navigating between 2 major growth phases now: the global expansion of the Model 3/Y platform and advancements in autonomy and new product introductions.</p><p>However, I have some reservations about Argus' other assessment. While the EV industry growth has slowed, they believe Tesla will overcome short-term demand and production challenges, ultimately emerging as a stronger and more efficient EV producer in both the short and long term. I think that despite Tesla's strong long-term prospects (I sincerely believe in Tesla for the next 5–10 years), the short-to-medium term future does not look as promising. In any case, I can't say that we have enough reason to believe otherwise.</p><p>Morgan Stanley remains cautious about Tesla's ability to match last year's delivery numbers, noting that Tesla would need to grow 2H 2024 deliveries by around 6% YoY to maintain volume. I don't think this will be as easy to do as it might seem at first glance.</p><p>One major area of concern I see is vehicle pricing and the automotive non-GAAP gross margin. This could be taken as optimistic for future prices that inventory levels fell, but 0%/low financing incentives and lower production in Q2 are likely to be margin headwinds according to Goldman Sachs analysts (proprietary source, July 2024). Moreover, margins may come under more strain due to potential tariffs later this year.</p><p>Another significant risk is the timing for new lower-cost models or variants. As we know, Tesla plans to begin shipping these new models as early as late 2024 or 2025. So, given the tight timeframe and the use of existing manufacturing lines, these new models may initially incorporate design elements from the Model 3 and Model Y.</p><p>The degree to which these new features and costs will be differentiated and how it all may lead to a growth slow is a big question right now. I think the company can, without even noticing it, cannibalize part of its existing traffic in this way.</p><p>It also confuses me that Wall Street is forecasting 20% earnings per share growth (CAGR) over the next 5 years and TSLA is expected to trade at 40.5x earnings at the end of 2028.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/64fc93da59973793c1e42869f146b198\" tg-width=\"640\" tg-height=\"173\"/></p><p>Seeking Alpha, TSLA, the author's notes</p><p></p><p>I don’t see much point in building a DCF model to question such a high premium. Of course, we can assume that robotaxis will take over the world, AI-powered solutions in autonomous transportation will change the game and all that, but none of that can happen overnight in my opinion. The company's stock needs to have a margin of safety that allows it to grow comfortably even at a somewhat high valuation. Take Nvidia (NVDA) as an example - even after a phenomenal rally, it eventually traded below 20x the forwarding P/E ratio, leaving many skeptics (myself included) hanging. But with Tesla, we see that it has no such margin of safety - the rally of the last few weeks is based only on hope and is not confirmed by the fundamentals.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/83926df5c79bcdf1f59e5e58c088ce0d\" tg-width=\"640\" tg-height=\"302\"/></p><p>TrendSpider Software, TSLA weekly, notes added</p><p></p><p>In the short term, I expect Tesla stock to start testing its way out of the recent price consolidation. The seasonal data on stock trading since 2010 points to a weakening of buyers in late summer - early fall.</p><p>Therefore, I recommend selling the current rip in TSLA stock.</p><h2 id=\"id_891535734\">Where Can I Be Wrong?</h2><p>Actually, I'm taking a significant risk in rating Tesla a "sell" today given its recent momentum, as much of the company's downturn may already be priced in due to its cyclical nature, meaning current margin issues may not persist. Wall Street is already anticipating a decline in EPS over the next 1 quarter only. Thus, an unexpected downturn may not materialize, and the next earnings announcement (on July 23rd) could change the outlook if Elon Musk and his team present some major positive developments. Furthermore, Tesla's long-term efforts to diversify its business and expand its ecosystem may ultimately prove my medium-term, currently pessimistic view on growth potential to be unfounded.</p><p>Perhaps I'm also wrong in calling Tesla as an overpriced stock because the company has many supporters who are willing to pay a very high premium for its growth prospects. This may continue.</p><h2 id=\"id_2310553008\">The Verdict</h2><p>Although, I think Tesla is a solid pick in the long term - more on this in my old articles - I'm still skeptical about the current hope in the air for a quick business recovery. I really like the company's approach to diversify and build a full-fledged energy-efficient ecosystem around its brand, but I don't like the trend in gross/EBIT margins and the very high competition that is getting stronger. Although the company managed to resist its rivals effectively in Q1 and apparently also in Q2, 2024, the trend towards cheaper electric cars continues. Nobody knows how low Tesla's gross margin can go until this is no longer a pressing issue for the company. Given the serious overvaluation (40.5x P/E forecast for 2028), I see some pretty serious downside ahead. Goldman Sachs sees a downside potential of ~16.6%, but given the recent price increases, I think this could be even higher.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4fa6bd55c28a7cf3c998b67e0820458e\" tg-width=\"640\" tg-height=\"384\"/></p><p>GS [proprietary source, July 2024]</p><p></p><p>I have therefore decided to leave my "Sell" rating unchanged today.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Tesla Stock: Sell The Rip</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTesla Stock: Sell The Rip\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-10 23:01 GMT+8 <a href=https://seekingalpha.com/article/4703146-tesla-stock-sell-the-rip><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>I don't think the current recovery rally in Tesla, Inc. stock will last long as it is not backed by the company's most important fundamentals as far as I can see.Q2 consolidated delivery figures ...</p>\n\n<a href=\"https://seekingalpha.com/article/4703146-tesla-stock-sell-the-rip\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY \"A\" (USD) ACC","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","BK4527":"明星科技股","LU1551013342.USD":"Allianz Income and Growth Cl AMg2 DIS USD","LU0056508442.USD":"贝莱德世界科技基金A2","BK4503":"景林资产持仓","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","LU0234572021.USD":"高盛美国核心股票组合Acc","LU2249611893.SGD":"BNP PARIBAS ENERGY TRANSITION \"CRH\" (SGD) ACC","LU0820561909.HKD":"ALLIANZ INCOME AND GROWTH \"AM\" (HKD) INC","IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","LU0109392836.USD":"富兰克林科技股A","LU0820562030.AUD":"ALLIANZ INCOME AND GROWTH \"AMH2\" (AUDHDG) H2 INC","IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","LU1914381329.SGD":"Allianz Best Styles Global Equity Cl ET Acc H2-SGD","LU0320765646.SGD":"FTIF - Franklin Income A MDIS SGD-H1","SG9999015945.SGD":"LionGlobal Disruptive Innovation Fund A SGD","LU1363072403.SGD":"Fidelity Global Financial Services A-ACC-SGD","BK4504":"桥水持仓","TSLL":"Direxion Daily TSLA Bull 2X Shares","LU0106831901.USD":"贝莱德世界金融基金A2","BK4511":"特斯拉概念","TSLA":"特斯拉","LU0097036916.USD":"贝莱德美国增长A2 USD","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU1548497426.USD":"安联环球人工智能AT Acc","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","IE0034235295.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"A\" (USD) ACC","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU1861558580.USD":"日兴方舟颠覆性创新基金B","LU1861220033.SGD":"Blackrock Next Generation Technology A2 SGD-H","BK4532":"文艺复兴科技持仓","LU0820561818.USD":"安联收益及增长平衡基金Cl AM DIS","BK4592":"伊斯兰概念","LU1839511570.USD":"WELLS FARGO GLOBAL FACTOR ENHANCED EQUITY \"I\" (USD) ACC","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0289739343.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (SGD) ACC","LU2756315318.SGD":"ALLIANZ INCOME AND GROWTH \"AMG\" (SGDHDG) INC A","BK4534":"瑞士信贷持仓","BK4159":"经销商","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU0238689110.USD":"贝莱德环球动力股票基金"},"source_url":"https://seekingalpha.com/article/4703146-tesla-stock-sell-the-rip","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2450024292","content_text":"I don't think the current recovery rally in Tesla, Inc. stock will last long as it is not backed by the company's most important fundamentals as far as I can see.Q2 consolidated delivery figures became the ultimate catalyst for Tesla to start the recovery rally, as it reported 443,956 deliveries for Q2, surpassing the consensus of 437,812.In the short term, I expect Tesla stock to start testing its way out of the recent price consolidation. The seasonal data points to a weak momentum shortly.Given the serious overvaluation (40.5x P/E forecast for 2028), I see some pretty serious downside ahead.I've therefore decided to leave my “Sell” rating unchanged today. Sell the rip.Magnus KvandalIntro & ThesisIf you've been following me for a while, you've probably read some of my previous 15 articles on Tesla, Inc. (NASDAQ:TSLA) stock. I downgraded the stock back in April 2024 when a share was trading for $185. I made the case for not buying the dip, and since then, TSLA's performance can be compared to that of the S&P 500 Index (SP500, SPY) thanks to the rally we've seen over the past three weeks alone.Seeking Alpha Premium, TSLADespite this phenomenal strength and the growing positive sentiment around TSLA, I don't think the current recovery rally will last long as it is not backed by the company's most important fundamentals as far as I can see.Why Do I Think So?As is typically the case with a thesis update, it's essential to be guided by the latest financial data. Therefore, I suggest taking a closer look at Tesla's Q1 2024 results, even though they are likely already fully reflected in the current stock price given the time since their publication.In Q1, Tesla's overall revenue declined by 9% to $21.301 billion. TSLA's Automotive division revenue was the key \"negative driver\" as it fell by 13% to $17.378 billion, while Services and Other revenue rose 25% YoY to $2.288 billion. The consolidated gross profit margin continued its downward trajectory, slipping from 19.34% last year to 17.35%, according to Seeking Alpha data. As we can see, the Auto margins saw a slight dip from 18.9% to 18.5%. However, as the CFO noted during the latest earnings call, when excluding the impact of the Cybertruck and the ramp-up costs for the Model 3 in Fremont, the margins actually improved slightly. This was thanks to cost reductions and revenue from the new Autopark feature for certain U.S. vehicles.In Q1 2024, Tesla delivered 386,810 vehicles, including 17,027 Model S and Model X and 369,783 Model 3 and Model Y, marking a 9% decrease from Q1 2023. We know that the Shanghai factory has been running at full capacity since Q4 last year despite previous production lulls, but this fact didn't help Tesla to maintain its market share in China, which continued to shrink in June:Tesla's share of China's new energy vehicle (NEV) market, which includes both battery electric vehicles and plug-in hybrids, fell to 6.92% in June, down from 11.16% last year. However, on a sequential basis, Tesla's sales in China are up 7.33% from May, when the Elon Musk-led company sold 55,215 vehicles.Source: Benzinga [July 8, 2024], emphasis added.On the bright side, the launch of Cybertruck sales has enabled the company to increase its global market share to 20%, according to CounterPoint Research. That's 2% less than in Q1 FY2023, but on a QoQ basis the growth looks significant indeed.CounterPoint Research dataTesla's revenue from Energy Generation and Storage grew in Q1 by 7% YoY to $1.635 billion due to high demand for Powerwall and Megapack products. However, such a low growth rate doesn't indicate to me any outstanding demand in the market, to be honest. Anyway, this demand is now \"leading Tesla to scale up production in a dedicated Megapack facility.\" Although perhaps my skepticism is unfounded because Tesla achieved a record high for stationary storage deployments at 9.4 GWh in Q2, nearly double Morgan Stanley's forecast (proprietary source, July 2024 data).As we know, the company faced enormous operational challenges, including shipping disruptions in the Red Sea and an arson attack at Gigafactory Berlin; both challenges have been resolved, according to the management commentary. Q2 delivery numbers indicate that it's indeed the case, as the company delivered 33,000 more units than it produced in Q2, resulting in a 7-day reduction in days' supply of inventory. This reduction provided a $1.5 billion boost to working capital (way higher than many analysts expected in the recent past). Overall, the Q2 consolidated delivery figures became the ultimate catalyst for TSLA to start the recovery rally, as it reported 443,956 deliveries for Q2, surpassing the consensus of 437,812.My current view on Tesla is quite mixed. On one hand, the company is clearly feeling strong pressure from its Chinese peers and the pricing war keeps damaging the margins. On the other hand, Tesla remains the largest EV maker in terms of global reach and brand strength. I agree with Argus Research analysts who noted recently (proprietary source, May 2024) that Tesla is navigating between 2 major growth phases now: the global expansion of the Model 3/Y platform and advancements in autonomy and new product introductions.However, I have some reservations about Argus' other assessment. While the EV industry growth has slowed, they believe Tesla will overcome short-term demand and production challenges, ultimately emerging as a stronger and more efficient EV producer in both the short and long term. I think that despite Tesla's strong long-term prospects (I sincerely believe in Tesla for the next 5–10 years), the short-to-medium term future does not look as promising. In any case, I can't say that we have enough reason to believe otherwise.Morgan Stanley remains cautious about Tesla's ability to match last year's delivery numbers, noting that Tesla would need to grow 2H 2024 deliveries by around 6% YoY to maintain volume. I don't think this will be as easy to do as it might seem at first glance.One major area of concern I see is vehicle pricing and the automotive non-GAAP gross margin. This could be taken as optimistic for future prices that inventory levels fell, but 0%/low financing incentives and lower production in Q2 are likely to be margin headwinds according to Goldman Sachs analysts (proprietary source, July 2024). Moreover, margins may come under more strain due to potential tariffs later this year.Another significant risk is the timing for new lower-cost models or variants. As we know, Tesla plans to begin shipping these new models as early as late 2024 or 2025. So, given the tight timeframe and the use of existing manufacturing lines, these new models may initially incorporate design elements from the Model 3 and Model Y.The degree to which these new features and costs will be differentiated and how it all may lead to a growth slow is a big question right now. I think the company can, without even noticing it, cannibalize part of its existing traffic in this way.It also confuses me that Wall Street is forecasting 20% earnings per share growth (CAGR) over the next 5 years and TSLA is expected to trade at 40.5x earnings at the end of 2028.Seeking Alpha, TSLA, the author's notesI don’t see much point in building a DCF model to question such a high premium. Of course, we can assume that robotaxis will take over the world, AI-powered solutions in autonomous transportation will change the game and all that, but none of that can happen overnight in my opinion. The company's stock needs to have a margin of safety that allows it to grow comfortably even at a somewhat high valuation. Take Nvidia (NVDA) as an example - even after a phenomenal rally, it eventually traded below 20x the forwarding P/E ratio, leaving many skeptics (myself included) hanging. But with Tesla, we see that it has no such margin of safety - the rally of the last few weeks is based only on hope and is not confirmed by the fundamentals.TrendSpider Software, TSLA weekly, notes addedIn the short term, I expect Tesla stock to start testing its way out of the recent price consolidation. The seasonal data on stock trading since 2010 points to a weakening of buyers in late summer - early fall.Therefore, I recommend selling the current rip in TSLA stock.Where Can I Be Wrong?Actually, I'm taking a significant risk in rating Tesla a \"sell\" today given its recent momentum, as much of the company's downturn may already be priced in due to its cyclical nature, meaning current margin issues may not persist. Wall Street is already anticipating a decline in EPS over the next 1 quarter only. Thus, an unexpected downturn may not materialize, and the next earnings announcement (on July 23rd) could change the outlook if Elon Musk and his team present some major positive developments. Furthermore, Tesla's long-term efforts to diversify its business and expand its ecosystem may ultimately prove my medium-term, currently pessimistic view on growth potential to be unfounded.Perhaps I'm also wrong in calling Tesla as an overpriced stock because the company has many supporters who are willing to pay a very high premium for its growth prospects. This may continue.The VerdictAlthough, I think Tesla is a solid pick in the long term - more on this in my old articles - I'm still skeptical about the current hope in the air for a quick business recovery. I really like the company's approach to diversify and build a full-fledged energy-efficient ecosystem around its brand, but I don't like the trend in gross/EBIT margins and the very high competition that is getting stronger. Although the company managed to resist its rivals effectively in Q1 and apparently also in Q2, 2024, the trend towards cheaper electric cars continues. Nobody knows how low Tesla's gross margin can go until this is no longer a pressing issue for the company. Given the serious overvaluation (40.5x P/E forecast for 2028), I see some pretty serious downside ahead. Goldman Sachs sees a downside potential of ~16.6%, but given the recent price increases, I think this could be even higher.GS [proprietary source, July 2024]I have therefore decided to leave my \"Sell\" rating unchanged today.","news_type":1},"isVote":1,"tweetType":1,"viewCount":59,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"lives":[]}
